Dagang NeXchange Berhad Annual Report 2018

14 Dagang NeXchange Berhad Annual Report 2018 Management Discussion & Analysis On 10 March 2016, Ping through its wholly owned subsidiary Ping Petroleum UK ("PPUK") acquired 50% of the entire interest of Shell U.K. Limited, Shell EP Offshore Ventures Limited and Esso Production and Production UK Limited in the Anasuria Cluster of oil and gas fields. The Anasuria Cluster is located approximately 175 kilometres east of Aberdeen in the UK Central North Sea and consists of: • 100% interest in the Guillemot field and the related field facilities; • 100% interest in the Teal field and the related field facilities; • 100% interest in the Teal South field and the related field facilities; • 38.65% interest in the Cook field and the related field facilities; and • 100% ownership in the common infrastructure known as the Anasuria Floating Production Storage and Offloading unit and related equipment. PPUK, together with Anasuria Hibiscus UK Limited established the joint operating company, Anasuria Operating Company Limited ("AOC") as the operator of the Anasuria Cluster assets. AOC has been approved as the License Operator for the assets by the Secretary of State for Energy and Climate Change of the United Kingdom Government. The principal place of the joint operations is Aberdeen, United Kingdom. PING’s proved and probable oil reserves stand at 27 million barrels equivalent ("MMboe") or about 20% increase as compared to 23 MMboe recorded during acquisition in 2015. The expansion of reserves and assets in Ping further improves the value of investment in PING. UpstreamExploration and Production DNeX Energy Sdn. Bhd. formerly known as DNeX Petroleum Sdn. Bhd. (“DPSB”) is a wholly owned subsidiary of DNeX, a company which principal activity is the provision of upstream oil and gas oilfield services including supplies of products and equipment. In 2015, DPSB undertook a proposed subscription on the 30% of the enlarged issued share capital of Ping for a consideration of USD10.0 million (RM40.525 million) primarily to obtain a stake in Anasuria cluster in the North Sea, United Kingdom. Investment in Ping continues to appealingly contribute to DNeX’s results at RM22.0 million in 2018 in comparison to previous year results of RM22.2 million. The reduced annual result is due to fewer lifting and higher tax expenses and operating expenses in the year reported. Ping continues to invest in new oilfields expanding its oil reserves and consequentially its value making it an attractive investment. Ping’s existing investments portfolio is summarised in table below. Avalon In April 2017, PPUK signed an agreement with Summit Exploration and Production Limited (“SEPL”) to farm into the Avalon oil and gas field, obtaining a 50% working interest in Block 21/6b. Avalon is an undeveloped field with a single high-quality Palaeocene reservoir, located in the UK Central North Sea. Static and dynamic modelling work on the accumulation is underpinned by results from two exploration and appraisal wells drilled in 2014 and 2017, with seismic inversion work conducted in the interim period. PPUK spudded the Avalon appraisal well with SEPL as the Operator in June 2017. In June 2018, PPUK acquired the operatorship of the Avalon field from SEPL. The Group’s share of the interests of the Avalon field remained unchanged at 50%. PING is seeking to develop the Avalon field through a phased development programme. Ranger The Group holds a 100% interest in Block 15/16d. Block 22/14c Following successful applications made during the 30th Licencing Round Awards, Ping was awarded Block 22/14c (SEPL 50% working interest and operator, PPUK 50% interest). Blocks 15/17c and 15/18c Following successful applications made during the 30th Licencing Round Awards, PING was awarded Blocks 15/17c and 15/18c (Azinor Catalyst Limited 50% working interest and operator, PPUK 50% interest). Anasuria cluster Others